Mortgage Rates Hit 2025 Low, Refinancing Surges & AI Reshapes Homebuying Amid Inflation and Market Shifts
Your Weekly Digest on Mortgage Trends, Market Movements, and Innovations Shaping Homebuying
What's Included:
Mortgage rates hit their lowest point in 2025 despite inflation, with the 30-year fixed-rate mortgage dropping to 6.87%.
Refinancing applications surged by 10% last week, reaching their highest level since October 2024.
Mortgage interest remains tax-deductible for loans up to $750,000, but only for homeowners who itemize deductions.
AI is reshaping homebuying, with 40% of buyers using it daily, though concerns about automation persist.
Here’s a complete low-down 👇
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Mortgage rates reach 2025 low despite inflation surge
In an unexpected turn, mortgage rates have declined to their lowest point in 2025, despite a surge in inflation. Freddie Mac reports that the average 30-year fixed-rate mortgage decreased to 6.87% for the week ending February 13, marking the fourth consecutive weekly decline. This trend offers a glimmer of hope for prospective homebuyers as the housing market approaches its peak season.
Typically, rising inflation leads to higher mortgage rates, as investors demand increased returns to offset the diminishing purchasing power of fixed-income investments. However, recent economic indicators, such as easing in certain inflation categories and lower-than-expected jobless claims, may have mitigated the upward pressure on rates. Additionally, the Federal Reserve's recent decision to pause its funds rate in late January has contributed to the stabilization of mortgage rates.
While the decline in mortgage rates is encouraging, the housing market remains unpredictable. High cancellation rates of home-purchase agreements and price reductions in cities like Phoenix, Tampa, and Jacksonville indicate ongoing volatility. As the spring home-buying season approaches, both buyers and sellers should stay informed about economic developments and be prepared for potential fluctuations in mortgage rates….Read More.
Borrowers Rush to Refinance as Mortgage Rates Decline
Mortgage applications saw a modest rise last week, with refinancing activity leading the charge, according to the Mortgage Bankers Association (MBA). The latest data revealed a 2.3% increase in total applications for the week ending February 7, 2025. Lower mortgage rates encouraged homeowners to refinance, pushing refinance applications up by 10%—the highest level since October 2024 and a 33% surge compared to last year.
Joel Kan, MBA’s vice president and deputy chief economist, noted that falling rates played a key role in driving refinancing momentum. “The average loan size for refinance borrowers increased, as these borrowers tend to be more responsive to rate changes,” Kan explained. Meanwhile, purchase applications dipped 2% from the previous week but remained 2% higher year-over-year. With rising home prices, affordability remains a challenge for prospective buyers despite slightly lower rates.
Market data showed refinances accounted for 40.2% of all mortgage applications, with adjustable-rate mortgages (ARMs) rising to 6.0% of applications. The average 30-year fixed mortgage rate for conforming loans edged down to 6.95%, while jumbo 30-year fixed rates slipped to 6.96%. With rates fluctuating, borrowers are keeping a close eye on opportunities to lock in favorable terms….Read More.
Is Mortgage Interest Tax Deductible in 2025? Here’s What Homeowners Need to Know
Homeowners can lower their taxable income by deducting mortgage interest, but only if they itemize their deductions. For tax year 2024, this deduction applies to interest paid on home loans up to $750,000 for a primary or secondary residence. With rising mortgage rates, more homeowners may find itemizing worthwhile, as their interest payments could surpass the standard deduction threshold.
The mortgage interest deduction has been around for years, but tax law changes have altered its limits. If your loan exceeds the $750,000 cap, only a portion of the interest is deductible. Additionally, home equity loan interest is deductible only if the funds were used for home improvements. Mortgage insurance premiums and closing costs generally do not qualify. Understanding these rules can help you maximize your tax benefits.
To claim the deduction, homeowners must compare their total itemized deductions with the standard deduction and file Schedule A with their tax return. Receiving Form 1098 from your lender, which details interest paid, is essential for accurate reporting. If your itemized deductions don’t exceed the standard amount, the mortgage interest deduction won’t provide additional tax savings. Consult a tax professional to determine the best approach for your situation….Read More
AI Transforms Homebuying, But Buyers Remain Cautious
Artificial intelligence is rapidly transforming the homebuying process, with a new survey from Veterans United Home Loans revealing that one in three buyers now rely on AI to search for homes, take virtual tours, and estimate mortgage costs. With 40% of prospective buyers interacting with AI daily, the technology is becoming an integral part of real estate transactions, offering convenience and efficiency in ways that were once unimaginable.
Despite its growing adoption, AI’s role in homebuying has sparked mixed reactions. While 29% of buyers are excited about the technology and its potential, 31% express more concern than enthusiasm, fearing over-reliance on automation and the loss of a personal touch. AI is proving particularly valuable in home searches and financial planning, with 32% of buyers using it to estimate mortgage payments and track market trends.
As AI-powered solutions continue to evolve, companies like AngelAI and Mr. Cooper are developing tools to enhance mortgage processes. Younger buyers, especially Gen Z and millennials, are leading the charge in AI adoption, ensuring its role in real estate will only expand. The question remains: will AI simply assist buyers, or will it redefine how homes are bought and sold?...Read More.
This wraps up our issue for the week.
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